Strategist: China Stocks a Huge Risk

Richard Bernstein, former chief investment strategist at Merrill Lynch, says China’s economy is overheating and that investors should avoid its stock market.

“China is an immense credit bubble that's going on right now,” he tells CNBC.

“I would actually rather invest into the U.S. right now than invest in China." Chinese bank loans jumped 30 percent in the first half of the year.

"They have massive overcapacity and their solution to that problem was to build more capacity over that," says Bernstein, now CEO of Bernstein Capital Management.

He says that those who believe China’s economy will lead a global economic recovery are mistaken.

But Bernstein also noted that China has begun to put a lid on its capacity.

China’s State Council yesterday told authorities to “resolutely” slash overcapacity, because the economy is still in a “critical period.” So China will curb its production of steel, cement, coal, glass and power.

Richard Bernstein, former chief investment strategist at Merrill Lynch, says China’s economy is overheating and that investors should avoid its stock market.“China is an immense credit bubble that's going on right now,” he tells CNBC.“I would actually rather invest into the...